As Congress was poised on Monday (April 20) to replenish funds for its small business loan program, complaints persist about how previous funds were doled out.
The program in question is the $350 billion Paycheck Protection Program, part of the $2 trillion federal stimulus law. The loans do not have to be repaid as long as the small to medium-sized businesses keep their employees on the payroll or rehire employees who have been laid off.
On some level, the stimulus program was a great success. Extremely quickly, there were 10 million loan applications. In fact, the entire $350 billion had already been promised by April 16.
However, the program drew criticism, as some large corporations managed to get loans despite the law being administered by the Small Business Administration (SBA). The loans are processed by financial institutions (FIs).
And, of course, many applications for loans were rejected. For example, Brian Scheinblum, owner of a boutique hotel and restaurant in Florida’s South Beach, filed his application as soon as his bank would take them (April 6). Scheinblum, who has a staff of 90, didn’t get in.
But somehow, burger chain Shake Shack and the Ruth’s Chris Steak House, which got $20 million from JPMorgan Chase, both got into the loan program. For its part, Shake Shack said it would give back the loan after the deal was revealed.
Overall, small businesses complain about delays, technical problems and lack of clarity about eligibility for the stimulus loans.
As reported by the Financial Times, Scheinblum complained about how his application was handled and the technicalities of the U.S. program. He questions how the program was structured, given that his restaurant and hotel have been closed since late March. The U.S. program requires him to rehire the employees.
For Scheinblum, the cost of his pricey Miami Beach property is his top expense, but that’s not something the program addresses. “So I have to give people a paycheck, but I haven’t actually got any work for them because they can’t work?” he said, pointing to social distancing requirements.
Also, another major problem for Scheinblum was getting timely responses from his bank. He said that for more than a week, all the bank said was that it had received a large volume of applications. Then he got a request for more information, which he promptly supplied. About an hour later, the SBA announced it had exhausted its loan funds, and the bank sent him an email that “that the funds had run out.”